Question

You are about to purchase your first home. The price of the house is $180K, the annual property taxes are estimated at $2,400 and the casualty insurance is estimated at $1,800 per year. You are estimating $3,800 in closing fees and expect to get a 30 year fixed rate mortgage for a fixed 4.0% with 1 point. You have $18k (10%) to put down on the home (plus any points and closing fees). Assume taxes and insurance remain constant for the duration of the loan. Your PMI payment is $200/month and will be needed for the first 4 years. Optionally, to avoid PMI by putting down 20%, you can borrow another $18k from your uncle Vini and pay him back at 10% interest (non-tax-deductible) for 4 years. You are in a 35% tax bracket.

a. How much cash would you need to have upfront in order to get this loan (i.e. closing costs and 10% down payment).

b. What is your monthly house payment assuming that you only pay 10% down (include all costs)?

First 4 years___________

Next 11 years___________

c. What is your monthly house payment assuming that you borrow money from uncle Vini (include the cost of that loan as well).

First 4 years_________

Next 11 Years_______________